D - Usurious Transactions & Presumptions

Question 1

Relevant Articles on Usurious Transactions & Presumptions

Answer 1

1175
1956, 1957
1306

Question 2

1175

Answer 2

Usurious transactions shall be governed by special laws

Question 3

1956

Answer 3

No interest shall be due unless it has been expressly stipulated in writing.

Question 4

1957

Answer 4

Contracts and stipulations, under any cloak or device whatever, intended to circumvent the laws against usury shall be void. The borrower may recover in accordance with the laws on usury

Question 5

meaning of simple loan or mutuum

Answer 5

• contract where one of the parties delivers to another money or other consumable thing
• the condition that the same amount of the same kind & quality shall be paid.
• it may be gratuitous or w/ a stipulation to pay interest

Question 6

meaning of usury

Answer 6

• the interest stipulated is not aligned with special law

Usury is contracting for or receiving interest in excess of the amount allowed by law for the loan or use of money, goods, chattels, or credits.

Question 7

Kinds of Interest

Answer 7

• Simple Interest
• Compound Interest
• Legal Interest
• Lawful Interest
• Unlawful interest

Question 8

2209 (simple interest)

Answer 8

If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum.

• the damages for the delay is the payment of the stipulated interest and absent thereof shall be 6%

Question 9

2212 (compound interest)

1959

Answer 9

[2212]
Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point

[1959]
Without prejudice to the provisions of Article 2212, interest due and unpaid SHALL NOT earn interest. [However], the contracting parties may by stipulation capitalize the interest due and unpaid, which as added principal, shall earn new interest.

[gpt]
Article 2212 deals with when interest starts to accrue additional interest from the time of judicial demand.
Article 1959 addresses the general rule that unpaid interest does not itself earn further interest, except when parties agree to capitalize the unpaid interest, in which case it becomes part of the principal and starts accruing new interest.

Question 10

Eastern Shipping Lines (1991) Formula on how to compute interest

breach of contract

simple ex. of not paying loan on time

Answer 10

First know the type of obligation breach of payment of sum of money [lfgcj]
(loan, forbearance of money, goods, credits, or judgment)

[Base] - A
1. Interest due

[Rate] - A
2. interest will be what is stipulated, if not stipulated and/or not contra bonos mores, it shall be the legal interest which is (6% as of july 1, 2013)

[Accrual] - A
3. absent of a stipulated reckoning date, accrual shall be computed from default (judicial or extrajudicial demands as per art. 1169) UNTIL full payment without compounding any interest UNLESS stipulated in contract, or expressed by law, or regulation

[Base] - B
Interest due on the principal amount accruing due to judicial demand shall separately earn legal interest

[Rate]- B
6% per annum (legal interest)

[Accrual] - B
Accrues from the time judicial demand was made UNTIL full payment

note
no Legal Interest will be added [after] judgment becomes final and executory
unlike eastern shipping lines v. ca & nacar v. gallery frames

Question 11

Eastern Shipping Lines Formula (year 1991) on how to compute interest

damages (duty to compensate)

or when obligation, NOT constituting a loan or forbearance of money, is breached

ex. your car was hit, and repairmen gives an estimate only

Answer 11

[Base]-A
demand established reasonable certainty

[Rate]-A
6% per annum (legal interest)

[Accrual]-A
from the time claim is made extrajudicially or judicially, UNTIL full payment

[Base] - B
when demand does NOT establish reasonable certainty

[Rate] - B
6% per annum (legal interest)

[Accrual] - B
From the date of the judgment of the trial court (at which time the quantification of damages may be deemed to have been reasonably ascertained), UNTIL full payment

Question 12

Nacar formula (year 2013) on how to compute interest

[par. 1]
breach in the payment of sum of money (loan or forbearance of payment)

Answer 12

[Base]
1. Interest Due

[Rate]
1. Interest is what is stipulated. [further], the interest due will also earn legal interest from the time it is judicially demanded

2. If stipulation absent, the rate shall be 6% per annum from default (judicial/extrajudicial demand according to 1169)

[ex]

10k (principal)
10% (stipulated interest)
6% (legal interest)

1k - (stated interest)
60 - (legal interest from principal interest)

Question 13

Nacar formula (year 2013) on how to compute interest

damages (duty to compensate)

[par. 2]
or when obligation, NOT constituting a loan or forbearance of money, is breached

ex. your car was hit, and repairmen gives an estimate only)

Answer 13

interest on the amount of damages awarded by discretion of the court at 6% per annum.

No interest will be given on unliquidated claims or damages [EXC] when demand can establish reasonable certainty

Once established, *interest shall begin to run from the time the CLAIM is made judicially or extrajudicially

But if reasonable certainty CANNOT be established at the time demand/claim is made, interest will only begin to run from the judgement of the court since the quantification of damages has now been reasonably ascertained

The actual base for the computation of legal interest shall in any case, be on the amount finally adjudged.

[gpt]
“actual base for the computation of legal interest” refers to the principal amount on which this 6% interest is calculated.

Question 14

Nacar formula (year 2013) on how to compute interest

[par. 3]
judgment of the court awarding a sum of money becomes final & executory

Answer 14

legal interest is 6% per annum from such finality until its satisfaction

And, in addition to the above, judgements that have become final and executory prior to July 1, 2013, shall NOT be disturbed and shall continue to be implemented applying the rate of interest fixed therein.

note
the interim period being deemed to be by then an equivalent to a forebearance of credit.

Question 15

Obligation default 2005, filed case 2010, until now it is pending year 2024. Now you are the judge

a. Write a demand letter to put someone in default

b. If you were the judge who will render a decision now, how will you compute the interest rate and the damages

Answer 15

Compute 12% from 2005 up to June 30 2013, after July 1 2013 will be 6% because the case is PENDING it’s not final judgment

Question 16

Lara’s Gift formula (year 2019) on how to compute interest

**obligation is breached and consists of payment of sum of money

Answer 16

[par.1]
interest due will be the one stipulated (always in writing) provided it is not contra bonus mores

absence of stipulated reckoning date, computation of [STIPULATED interest] shall be from default (extra-j, judicial) UBTIL FULL PAYMENT

w/o compounding interest unless expressly stipulated by the parties, by law or by regulation

The INTEREST DUE on the [principal amount] accruing as of JUDICIAL demand shall separately earn LEGAL interest at the prevailing rate prescribed by the Bangko Sentral ng Pilipinas from the time of judicial demand [UNTIL FULL PAYMENT]

[par. 2]
in the absence of a stipulated interest in a [lfgcj], the rate of interest on the PRINCIPAL AMOUNT shall be the prevailing legal interest prescribed by BSP which shall be computed from default

Question 17

A trading company, ABC Enterprises, entered into transactions with XYZ Suppliers, a supplier of industrial and construction materials, from January to December 2007, amounting to a total of P1.3 Million The purchases were made on a 60-day credit term (acquire goods based on credit), with a condition that 24% per annum interest would be charged on overdue accounts.

A demand letter for settlement was issued on January 21, 2008, ABC Enterprises failed to pay the outstanding accounts. Consequently, on February 5, 2008, XYZ Suppliers filed a Complaint for Sum of Money with Prayer for Attachment against ABC Enterprises.

Based on the given facts, how would you rule
.

Answer 17

1. 1.3 million representing the principal amount plus stipulated interest at 24% per annum to be computed by January 21, 2008 (extrajudicial demand) until full payment
2. Legal interest on the 24% per annum interest due on the principal amount accruing as of (judicial demand), at the rate of 12% per annum from the date of judicial demand on [5 February 2008 until 30 June 2013], and thereafter at the rate of 6% per annum from [1 July 2013 until full payment.]

Question 18

judgement is grouped alongside with loan forberance in lara’s case

whereas the eastern and nacar is a third category

on lara’s, if the parties agreed on payment of interest in writing, and no stipulated interest rate

what differentiates lara’s gift from the cases,

Question 19

“until full payment”

compuodned applies only to stipulated (applicable to loan, sell on credit

gen, you dono’t compound unless it was stiuplated that even the compesnatory interest will earn interest (in the form of penalty charges)

Answer 19

the rule that stipulated intereest may be declared contra bones (only applicable to stipulated interest) regardless of the amount because that’s law

Question 20

FEB 28 - PRESUMPTIONS

Answer 20

FEB 28 - PRESUMPTIONS

Question 21

Interest payment: “The receipt of the principal by the creditor, without reservation with respect to the interest, shall give rise to the presumption that said interest has been paid.” (1176 cf. 1253: payment of
interest precedes payment of principal as rule)

receipt of the principal by the creditor -

ex.
due: 100k (Principal)
20k (interest)
====
120k

then debtor brings 100k
1. i pay 100k (what is the effect of paying 100k)

1253 “ If the debt produces interest, payment of the principal shall not be deemed to have been made until the interests have been covered.”

Answer 21

[1]
the presumption is that the said interest has been paid

1253 - the 100k payment is paid to the interest (20k) , and the 80k remaining of it to the principal so the outstanding now is 20k

• rule on application of payment
  AoP - presupposes that the obligor/debtor pays but the paymenet will NOT satisfy all outstanding obligations.

1176 - debtor says he is paying the P, and creditor accepts. so the statement “if there is no reservation” is this scenario

Question 22

1176 and 1253, where do you apply them?

debtor delivered the amount of 100k and creditor accepted.

Answer 22

1253 - by operation of law, the result/effect is 20k paid, 80k is the P balance

Question 23

how to effect resevation in the scenario

Answer 23

1176 - creditor will accept the 100k but there is a note that says interest of 20k is still unpaid/not paid yet

Question 24

why would 1253 focus on paying on the interest?

Answer 24

this rule is for the benefit of the creditor.

Question 25

installment payment

The receipt of a later installment of a debt without reservation as to prior
installment, shall likewise raise the presumption that such installments have been paid.

Question 26

D borrowed P120,000.00 from C on January 1, 2012, payable in 12 equal monthly installments of P10,000.00 beginning January 1, 2013.

On April 1, 2013, C received the first P10,000.00 from D. C issued a receipt dated Apr. 1, 2013.

Is there a presumption here that the installments due for the months of Jan., Feb., and March 2013 were already paid?

Answer 26

[notes]
- No presumption can be applied [1176(2)] here. Was there a receipt of a later installment? No.

[notes in class]
C issued receipt April 1, 2023.
- What does the date of the receipt? When payment was received. It only proves that you receive payment on April 1, 2023.
- so the effect if it’s silent on the 10k paid on the month of april, then jan, feb, and march is paid for as well.
- Now whether or not the 10k is for April 1, 2023, “it has to say “10k for the month of April”

Question 27

how to make 1176 (2) apply?

“The receipt of a later installment of a debt without reservation as to prior installments, shall likewise raise the presumption that such installments have been paid.”

Answer 27

The date only proves that on April 1, payment has been received but it does not indicate that it is payment
for the month of April, hence the presumption on Art 1176 does not arise. In this case, creditor must make a
reservation that payment from previous months have not yet been satisfied.

so apply the presumption of 1176 (2), the receipt issues must indicate the
- specific month of installment covered by the payment
- date of receipt (this is NOT controlling)

Question 28

skip extrajudicial remedies judge will do this

Question 29

Specific performance, substitute performance, equivalent performance

Question 30

what’s diff

1191 recission
1380-89 recission under contracts

Answer 30

1191 - The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.

1380 - Contracts validly agreed upon may be rescinded in the cases established by law.

Question 31

1191 to distiniguish 1380, we use the term RESOLUTION

1191 - remedy for SUBTANTIAL BREACH IN OBLIGATION
- perfectly valid contract
- no defect
- but because of substantial breach, the aggrieved party has the right to UNDO as if it had never been entered into. Whatever you received as a result of that, you RETURN for both parties

1380 - basis for recession is Not substantial but LEsION (damage) or economic injury suffered by someone (enumrated in 1381)

Answer 31

1191 (UNDOING OF CONTRACT

Question 32

Art. 1381. The following contracts are rescissible:

(1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof;

ward - is someone who does not have legal capacity to enter into a transaction/contract

several grounds to incapicated the ward to do acts with legal effects
- minor (unless represented by a guardian)
-

Answer 32

in a case of minor, there are two guardians

1st - legal guardian (under the law, refers to parents)

2nd - guardian ad litem (guardian appointed by the court)

Question 33

if you are the guardian of the property, yo ucannot sell if your ward will suffer by more thaon 1/4. (1381 full)

ex. 100 mil of property and you sell it for 60 mil, 40% is above 25%

what is the character of the contract in the guardian (recessible) - valid but recessible

Answer 33

recession is different from termination
if you terminate or cancel the contract is different from resolution as T

Question 34

when rescinding contrct, why go to court?

Answer 34

because allege of substantial breaech, won it’s true or not,

Question 35

BASIC RULES ON RESCISSION:
2. These remedies of fulfillment and rescission are NOT CUMULATIVE, BUT ALTERNATIVE”

• ex. you used specific perofrmance, recisionn is opposite, why do you have both remedies? it means you can decide

3. However, if fulfillment becomes impossible or prohibited by lawful authority, rescission may still be
   availed of even if fulfillment had already been chosen

• applicable is alternative if POSSIBle pa ang

4. The right to rescind is not however absolute and DOES NOT APPLY IF THE BREACH IS ONLY
   SLIGHT (not substantial8) remedy of specific performance is availabl

• that’s why judicail action because it rquires an independent and fair judge and not a party decideing

how do

Question 36

how to know if it is subtantial breach?

Answer 36

the threshold is
- has the breach defeated the object and purpose of the contract?

Question 37

REVIEW

Answer 37

REVIEW

Question 38

any stipulation of interest that is NOT in writing is NOT enforceable

Question 39

“Stipulations authorizing iniquitous or unconscionable interests are contrary to morals (‘contra bonos
mores’), if not against the law. Under Article 1409 of the Civil Code, these contracts are inexistent and void
from the beginning. They cannot be ratified nor the right to set up their illegality as a defense be waived.
“

• even if borrower doesn’t assail the interest, the fact that it’s contra bonos mores makes it void ab initio.

Question 40

You are using the services of a credit card company for 1 year already. What this means is that, you have been receiving billings every month. Then, after having so much financial difficulties, you are not able to pay, then the company filed a case against you. You said that, the interest rate is Contra Bonos Mores, then the company said, “hey, but your conduct of paying the monthly billings before you filed this case should be deemed a waiver of your right to question the interest rate, or at the very least, you must have ratified the stipulation because you paid it.

is the aforementioned statement by the creditor a tenable argument?

Answer 40

No, because when the stipulation contravenes public morals, it is described as inexistent and void, and therefore, cannot be ratified or be subject to a waiver.

Another important concern: if you notice, If the interest rate is declared excessive, unconscionable, exorbitant, the court will reduce it right and will apply legal rate. What is declared void is not the stipulation to pay interest, but only the INTEREST RATE. This is why the courts will simply reduce the rate of interest to the legal one, but not remove the debtors obligation to pay such.

Question 41

In a situation where the obligation of the obligor accrued during the Eastern Shipping Lines formula, this is before July 1, 2013: The legal rate here is 12 percent.

Then ni abot na si July 1, 2013, wala pa na decide-an, and even if na decide-an na, dli pa final and executory. The possibilities kay basin gi appeal or gi elevate. That is why when you read the decision of the supreme court kay didto raman siya in final, ang gi buhat sa SC kay, 12 percent eastern shipping lines, before July 1 2013, pag abot sa July 1 2013, gi reduce ni court to 6 percent until full payment.

Answer 41

So you should know the difference, kay kung na final na before July 1, it will not be disturbed, so the 12 percent legal rate will be applied until fully paid, even if karon pa na bayran 2020.